TIDMSBI
RNS Number : 2203H
SourceBio International PLC
05 April 2022
SourceBio International plc
("SourceBio", the "Company" or the "Group")
Final Results
Record revenues, profits and cash generation
Re-investment in core Healthcare Diagnostics business unit via
LDPath acquisition
SourceBio International plc (AIM: SBI), a leading international
provider of integrated state-of-the-art laboratory services and
products , announces its final results for the year ended 31
December 2021.
Corporate highlights
-- In March 2022, the Group completed the s trategic acquisition
of LDPath Limited, a pioneer in digital scanning technology for
histopathology. The acquisition strengthens SourceBio's position to
become the leading outsourced partner providing Cellular Pathology
and Digital Pathology testing services to NHS Trusts and private
healthcare providers in the UK
-- The enlarged Group will target the conversion of both NHS and
private clients to the Digital Pathology offering, including the
use of Artificial intelligence ("AI") to further streamline the
reporting of more routine pathology cases and to ensure the highest
quality of reporting
Financial highlights
-- Revenue increased by 82% to GBP92.4 million (2020: GBP50.7 million)
-- Gross profit increased by 77% to GBP36.2 million (2020: GBP20.5 million)
-- Adjusted EBITDA(1) increased by 70% to GBP24.1 million (2020: GBP14.2 million)
-- Basic and diluted EPS increased by 325% to 22.5 pence per share (2020: 5.3 pence per share)
-- Cash generated from operations increased by 420% to GBP33.3 million (2020: GBP6.4 million)
-- Cash balance increased by GBP24.9 million to GBP33.3 million
(2020: GBP8.4 million) with no bank borrowings
(1) Adjusted EBITDA is earnings before interest, tax,
depreciation and amortisation, share based payments and exceptional
costs
Operational highlights
2021
-- Significant scale-up of the Nottingham laboratory facilities,
initially for increased COVID-19 PCR testing volumes, now being
repurposed towards Cellular Pathology as actual and anticipated
volumes increase
-- Further enhanced the management team, including strategic
marketing, as the Group's focus moves from high-volume COVID-19 PCR
testing towards aggressive growth in the core business units
-- Successful UKAS audit and full accreditation renewal, with superlative feedback
Post year end
-- Solid start to the new year's trading in the core business units
-- Launch of a Precision Medicine business line within the
Genomics business unit, capitalising on the Group's existing
Reference Laboratory offering and its clinical trials work
-- Successful UKAS accreditation of SourceBio's Digital Pathology Platform
-- Integration of the LDPath acquisition is well underway. The
enlarged team, branded as SourceLDPath, are spearheading an
aggressive campaign to roll-out the Group's Digital Pathology
offering to both NHS and private healthcare clients
Jay LeCoque, Executive Chairman, commented: "I am pleased to
report to shareholders record revenues and profits in an extremely
busy year for SourceBio. The results have been dominated by the
provision of COVID-19 PCR testing services which has been pivotal
in allowing us to re-invest in our core Healthcare Diagnostics
business unit, through acquisition. It is particularly encouraging
to see our core business units meeting or beating pre-COVID-19
levels of trading. In particular, our Cellular Pathology business
is seeing material month-on-month growth in volumes and revenues,
fuelled by the return of elective surgeries and the Government
initiatives to reduce the enormous backlog of patient waiting
lists. This was the rationale for our recent acquisition of LDPath,
which provides us with the wet laboratory and Digital capacity to
accelerate growth in market share and profitability. The
integration of LDPath will take the best of the best from each of
SourceBio and LDPath to create an unparalleled combined new
business opportunity. The Board is appreciative of the dedication
and efforts from all its staff in a very challenging year and is
also grateful for the support from its shareholders."
Contacts:
SourceBio International plc www.sourcebiointernational.com
Jay LeCoque, Executive Chairman Via Walbrook PR
Tony Ratcliffe, Chief Financial Officer
Liberum (Nominated Advisor and Broker) Tel: 020 3100 2000
Richard Lindley / William Hall
Walbrook PR Limited Tel: 020 7933 8780 or sourcebio@walbrookpr.com
Paul McManus / Sam Allen Mob: 07980 541 893 / 07502
558 258
About SourceBio International plc
www.sourcebiointernational.com
SourceBio is a leading international provider of integrated
state-of-the-art laboratory services and products with clients in
the healthcare, clinical, life science research and biopharma
industries, with a focus on improving patient diagnosis, management
and care. Group revenues are derived from four business units:
-- Healthcare Diagnostics - histopathology cancer screening and
clinical diagnostic services for the NHS and private healthcare
providers across the UK and Ireland, including Digital
Pathology
-- Genomics - DNA sequencing services and Precision Medicine
offering for pharmaceutical and biotechnology companies, academia,
contract research organisations (CROs) and other research groups in
the UK, Europe and North America
-- Stability Storage - shelf-life testing services and equipment
for pharmaceutical and biotechnology companies, contract
manufacturers and analytical testing companies from around the
world but primarily in the UK, Ireland and the USA
-- Infectious Disease Testing - a range of COVID-19 testing
services for commercial enterprises, private healthcare groups and
the NHS, including PCR testing under ISO 15189 accreditation.
SourceBio also provides employee testing solutions to industry,
direct to consumer home test kits and venue testing.
More details on Group operations can be found here:
www.sourcebioscience.com
SourceBio International plc (SBI) is listed on the AIM market of
the London Stock Exchange.
Executive Chairman's Review
Summary of 2021
I am pleased to report 2021 as a year of significant growth and
achievement in the business, indeed a record trading year for the
Group. The Group has delivered substantial progress and has
reported very strong financial results for 2021 that will fuel
further growth initiatives in its core base business units, both
organically and via acquisition.
The key performance indicators currently used by the Group are
revenue, gross profit, adjusted EBITDA and cash resources. Revenues
for the year totalled GBP92.4 million, an increase of 82% on the
prior year revenues of GBP50.7 million, gross profit was GBP36.2
million, an increase of 77% on the prior year gross profit of
GBP20.5 million, and adjusted EBITDA was GBP24.1 million, an
increase of 70% on the prior year adjusted EBITDA of GBP14.2
million. Cash balances at the year-end date totalled GBP33.3
million with no bank or shareholder borrowings, compared to cash of
GBP8.4 million at the prior year-end date, highlighting the Group's
very strong cash conversion. Further details of the financial
performance can be found in the Chief Financial Officer's Review
and within the financial statements.
The continued impact of the COVID-19 pandemic in 2021 has
clearly provided many ongoing challenges across the globe.
SourceBio mitigated the challenges by offering large-scale
laboratory based COVID-19 PCR testing services from its Nottingham
facility, delivered from a newly created Infectious Disease Testing
business unit. It grew the scale of this operation through 2020 and
further in 2021. This enabled the Infectious Disease Testing
business unit to provide a significant component of revenue, gross
margin and cash generation in the year. The acquisition of LDPath
in March 2022, a digital leader in histopathology, demonstrated the
Group's capability to secure strategic acquisitions that accelerate
revenue and profit growth in its core business units. A more
detailed review of the year, by business unit, is presented
below.
The Board is very grateful for the significant hard work and
dedication of the entire SourceBio team in 2021 and for the many
achievements in what has certainly been a uniquely challenging
backdrop. The Board is also appreciative of shareholders for their
continued strong support.
Business review
The business comprises three core business units - Healthcare
Diagnostics, Genomics, Stability Storage plus a fourth business
unit, Infectious Disease Testing, as noted above. Starting with
Healthcare Diagnostics, a brief review of each business unit is
detailed below.
Healthcare Diagnostics
Healthcare Diagnostics provides a complete histopathology and
clinical diagnostics service for the sectioning, processing,
staining and analysis of tissue samples on self-prepared and
pre-prepared slides. SourceBio operates ISO 15189 accredited
medical laboratories and has built a significant network of
specialist consultant pathologists, all registered with the Royal
College of Pathologists and the General Medical Council. SourceBio
maintains service level agreements with over 130 NHS departments,
private healthcare providers and pharma and biotech customers.
The principal revenue stream within Healthcare Diagnostics is
Cellular Pathology testing, which involves the examination of
patient tissue pre- and post-operative. This business had rapidly
grown in recent years, at approximately 40% per annum in 2018 and
2019. The arrival of the COVID-19 pandemic in the first quarter of
2020 and its continued impact had a material effect on the quantity
of elective surgeries in the UK and thus the value of Cellular
Pathology revenues in the latter nine months of 2020 and for the
first half of 2021. The growing size of the national elective
surgery waiting lists, or backlog, has been very well publicised in
the media and the Group prepared itself for a material scale-up in
activity. The level of business increased through 2021, as efforts
were made to tackle the mounting backlog of elective surgeries.
The second quarter of 2021 delivered revenues nearly 80% higher
than the first quarter, the third quarter of 2021 then delivered
revenues nearer 60% higher than the second quarter. The momentum of
growth did slow to a degree in the final quarter of 2021 as the
Omicron variant of COVID-19 caused further challenges, causing
revenues to dip approximately 11% below those generated in the
third quarter, although still approximately 150% higher than the
first quarter.
In aggregate, these services generated revenues totalling GBP6.4
million (2020: GBP4.4 million) and a gross profit of GBP2.1 million
(2020: GBP1.0 million), equating to a gross margin percentage of
33.3% (2020: 23.6%), the increase driven by the increased volumes
of business.
Genomics
Genomics is the study of genes to help progress research and
clinical discovery for the pharmaceutical and healthcare
industries. SourceBio offers both traditional Sanger Sequencing,
which for many years has been the industry accepted standard for
sequencing single strands of DNA at a time, and Next Generation
Sequencing ("NGS"), which allows the sequencing of millions of
strands of DNA at once. NGS sequencing projects are typically
larger in scale and complexity but fewer in number. Following the
strategic investment in state-of-the-art NGS equipment in late
2019, the 2020 NGS revenues increased from 25% to 33% of total
Genomics revenues and this further increased to 41% of total
Genomics revenues in 2021. Genomics revenue streams were impacted
by COVID-19 in 2020 but bounced back quickly.
In aggregate, these services generated revenues totalling GBP5.0
million (2020: GBP4.2 million) and a gross profit of GBP1.9 million
(2020: GBP1.7 million), equating to a gross margin percentage of
38.7% (2020: 41.1%).
Stability Storage
The Stability Storage business unit comprises three offerings:
Stability Storage Services, Manufacturing, Service and
Validation.
The largest of these offerings is Stability Storage Services,
which generated 54% (2020: 52%) of this business unit's revenues,
with revenue increasing to GBP3.8 million in the year (2020: GBP3.5
million). SourceBio delivers outsourced temperature and
humidity-controlled environment storage services for stability
trials at all ICH (International Council for Harmonization of
Technical Requirements for Pharmaceuticals for Human Use) specified
conditions as well as at bespoke conditions as required.
Environmentally controlled stability storage is the gateway for a
number of products to be released and to stay on the market. These
products range from drug products, medical devices, consumer
products and packaging. The Group is well established in this
market with accredited facilities in Rochdale, UK as well as in
Tramore, Ireland and San Diego, USA. Business is secured on
recurring contracts which are typically of three-year duration. By
its nature, this business line therefore provides highly visible
recurring revenue at gross margin levels of approximately 80% -
indeed this business line has been relatively robust throughout
COVID-19.
For those clients wishing to perform shelf-life testing
in-house, the Group manufactures temperature and
humidity-controlled equipment such as cabinets (low-volume
storage), reach-in rooms and walk-in rooms (high-volume storage)
for installation at customers' premises. This activity generated
14% (2020: 16%) of this business unit's revenue with revenue
decreasing to GBP1.0 million in the year (2020: GBP1.2 million).
Sales of capital equipment are naturally variable and subject to
economic confidence.
SourceBio also provides Service and Validation services to
established clients which have previously purchased and installed
SourceBio equipment. These services comprise regular and periodic
servicing and testing of installed storage equipment at customer
premises to ensure adherence to relevant regulatory standards. This
activity generated 32% (2020: 32%) of this business unit's revenue,
with revenue increasing to GBP2.3 million in the year (2020: GBP2.2
million) although both 2020 and 2021 have faced challenges caused
by COVID-19 travel restrictions.
In aggregate, these activities generated revenues totalling
GBP7.0 million (2020: GBP6.9 million) and a gross profit of GBP3.6
million (2020: GBP3.9 million), equating to a gross margin
percentage of 50.6% (2020: 56.1%).
Infectious Disease Testing
As recorded in the 2020 Annual Report, following the start of
the COVID-19 pandemic, SourceBio quickly leveraged its scientific
capabilities and existing accreditations, reconfigured its
laboratory space and capitalised on its staff expertise to set up a
COVID-19 PCR testing capability which launched in May 2020. The
Group performed over 758,000 tests by the end of 2020, with a peak
hitting 10,517 tests in one day. Investments were made to further
increase capacity in 2021, allowing the Group to perform
approximately 2,100,000 tests in the year, with a peak throughput
hitting 20,298 tests in one day.
Daily test volumes fluctuated significantly through the year,
largely driven by Government policy, particularly regarding the
testing requirements for travel. There were a number of changes in
policy in the year and this fluid backdrop has continued into early
2022. The customer base in the year comprised travel related
companies, high street pharmacies, certain NHS trusts and other NHS
constituents, as well as private healthcare groups and commercial
clients.
High-volume COVID-19 PCR laboratory-based tests formed the vast
bulk of the business unit's revenues for 2021 although modest
revenues were also secured from the sale of lateral flow tests and
from mobile based PCR testing.
These services generated aggregate revenues totalling GBP73.6
million (2020: GBP34.5 million) and a gross profit of GBP28.5
million (2020: GBP13.7 million), equating to a gross margin
percentage of 38.8% (2020: 39.6%).
Other non-core services
The Group also offered additional legacy products that it sees
as non-core and have now been fully wound down. These products
comprised the supply of a set of library clones for research
purposes, the market for which is generally declining, and the
manufacture and supply of blood and tissue serological products to
a limited customer base.
In aggregate, these activities generated revenues totalling
GBP0.4 million (2020: GBP0.8 million) and a gross profit of GBP0.1
million (2020: GBP0.2 million), equating to a gross margin
percentage of 21.8% (2020: 20.4%).
Board and Governance
There have been no changes to the Board in the year. The Board
reviewed its composition and other arrangements in the year and
continues to believe that the current make-up of the Board is
appropriate to the Group's needs and to meet its governance
commitments.
Outlook
The Group closed a record year of business in 2021, with
material growth in revenues, gross margin and cash generation. It
started the new year with a very strong cash balance of GBP33
million and with no bank or shareholder borrowings.
Trading in the early months of 2022 for the core business units
has been solid and in line with the Board's expectation.
The Board believes that its three core business units,
Healthcare Diagnostics, Genomics and Stability Storage all offer
both near-term and longer-term sustained growth potential. In
particular, whilst elective surgeries were significantly and very
publicly delayed for many months during 2020 and 2021, coupled with
the continuing shortage of pathologists, the backlog of potential
work for our Cellular Pathology teams appears to have grown very
substantially. HM Government has announced cash and initiatives
that will be directed to help solve this issue. Volumes of Cellular
Pathology work began returning to the Group in more meaningful
volumes in the second half of 2021 and this has continued to
accelerate in the early months of 2022. The Board is very
optimistic of securing significant future volumes of work and
believes that the current market conditions are supportive and
provide an excellent backdrop for the Group's acquisition of
LDPath, which completed in March 2022. The Group's Cellular
Pathology capabilities have significantly increased following this
acquisition, as the Group has an enlarged customer mix of both NHS
and private healthcare clients and SourceBio expects to lead the
market migration towards its Digital Pathology platform.
The Group has identified attractive growth opportunities in the
Precision Medicine marketplace and this will be a focus of
attention in 2022, as a discrete offering neatly building on
existing offerings, including personalised tests from the Reference
Laboratory which was previously within the Healthcare Diagnostics
business unit, and clinical trials work undertaken in the Genomics
business unit.
In response to declining demand, the Group is in the process of
materially scaling down its COVID-19 PCR testing operations and
other COVID-19 offerings, with its focus aimed clearly at
repurposing equipment, laboratory space and inventory and
re-aligning people as far as possible to drive growth from the
three core business units - Healthcare Diagnostics, Genomics and
Stability Storage.
Given the current market environment, the Board believes that
SourceBio is well positioned to deliver further attractive growth
in revenue and margin from these core business units in 2022. The
Group is pleased to have strengthened its position in Cellular
Pathology with the LDPath acquisition and will continue to seek
further strategically attractive acquisition opportunities.
We look forward to updating shareholders further during the
year.
Jay LeCoque
Executive Chairman
Chief Financial Officer's Review
Revenue
Revenue for 2021 was GBP92.4 million (2020: GBP50.7 million), an
increase of 82%, summarised across the business units as below:
2021 2020
Business unit GBP'000 GBP'000
-------------------------------- --------- ----------------
Healthcare Diagnostics 6,411 4,424
Genomics 4,960 4,219
Stability Storage 7,037 6,880
--------------------------------- --------- ----------------
Core operations 18,408 15,523
Infectious Disease Testing 73,567 34,463
Non-core operations, now wound
down 422 751
--------------------------------- --------- ----------------
Total 92,397 50,737
--------------------------------- --------- ----------------
The Group comprises four business units, Healthcare Diagnostics,
Genomics, Stability Storage and Infectious Disease Testing. The
three core business units of Healthcare Diagnostics, Genomics and
Stability Storage were all impacted by COVID-19 from early 2020,
with Genomics and Stability Storage returning to normal levels of
operations during 2020 and Healthcare Diagnostics returning to pre
COVID-19 levels of business during 2021. The Infectious Disease
testing business unit was established in May 2020 to launch and
commercialise COVID-19 PCR testing services which peaked during
2021.
-- The Healthcare Diagnostics business unit included revenues of
GBP4.9 million (2020: GBP2.7 million) from Cellular Pathology
testing, where volumes were heavily impacted by well publicised
delays in elective surgeries in 2020 which continued until
mid-2021. As elective surgeries returned with more volume in the
second half of 2021, the volume of Cellular Pathology testing
increased. However, the pace of this return of business did slow in
the fourth quarter of 2021 as the Omicron variant of COVID-19 had a
marked impact on the level of elective surgeries. The Reference
Laboratory delivered revenues of GBP1.5 million (2020: GBP1.7
million), the modest reduction being largely as a result of one-off
evaluation work carried out in 2020;
-- Genomics comprises traditional Sanger Sequencing, which
delivered revenues of GBP2.9 million (2020: GBP2.8 million) and
Next Generation Sequencing ("NGS"), which delivered revenues of
GBP2.0 million (2020: GBP1.4 million). The Company invested in
state-of-the-art equipment in 2019 as part of the strategic
objective of skewing business towards a greater proportion of NGS
work. This had already proved successful in 2020 and the trend of
skewing further to NGS continued in 2021;
-- Stability Storage comprises Stability Storage Services which
delivered revenues of GBP3.8 million (2020: GBP3.6 million),
Service and Validation which delivered revenues of GBP2.3 million
(2020: GBP2.2 million) and Manufacturing which delivered revenues
of GBP0.9 million (2020: GBP1.1 million). Stability Storage
Services, which are sold on a recurring revenue model, have been
particularly robust throughout COVID-19. Service and Validation
work was impacted in 2020 and 2021 by the restrictions to travel,
whilst equipment sales, being capital purchase items, are naturally
more variable in nature; and
-- Infectious Disease Testing comprises primarily high-volume
laboratory based PCR testing services delivered from the Group's
Nottingham laboratories. The Group has offered a fuller portfolio
of COVID-19 offerings which included the resale of lateral flow
tests and the provision of mobile based testing services. PCR
testing services delivered revenues of GBP71.8 million (2020:
GBP34.5 million). The supply of lateral flow tests and the
provision of mobile testing services delivered combined revenues of
GBP1.8 million (2020: GBPnil).
Gross profit
Overall gross profit for the year was GBP36.2 million (2020:
GBP20.5 million), representing a gross margin percentage of 39.2%
(2020: 40.3%). Although the quantum and mix of revenue dramatically
changed in the year, overall gross margin percentage levels were
largely maintained. Of particular highlight is that market pressure
materially impacted COVID-19 PCR pricing, particularly in the
second half of 2021, with average pricing of GBP33.13 per PCR test
(excluding carriage, test kit and other sales) achieved during the
year compared to average pricing of GBP43.17 in 2020. This amounted
to a 23% pricing reduction which was almost entirely mitigated by
efficiencies and procurement savings derived from economies of
scale.
Expenses
Total expenses for the year were GBP15.1 million (2020: GBP9.8
million), an increase of GBP5.3 million. The main driver of this
was an increase in commercial and administrative expenses in order
to scale the business to achieve the substantial increase in
revenues. The largest component of this increase was higher
non-direct staff costs of GBP3.3 million, driven by both a required
increase in headcount and a marked impact of wage inflation to
secure and retain the talented team. The Company also incurred a
full year of costs related to being a public company. There were no
exceptional items in 2021 and a total of GBP1.5 million of
exceptional expenses were incurred in relation to the Company's
Admission to AIM in 2020. The total charge for depreciation of
tangible fixed assets and amortisation of intangible fixed assets
increased to GBP2.9 million (2020: GBP2.0 million) due primarily to
the increased laboratory equipment depreciation. The Group incurred
a share based payment charge of GBP0.1 million (2020: GBPnil)
following the creation of the two employee share schemes in October
2021.
Adjusted EBITDA
The Board's key measure of underlying business profitability and
assessing trends across periods is adjusted earnings before
interest, tax, depreciation and amortisation, share based payments
and exceptional items (adjusted EBITDA). In 2021, the Group
achieved an adjusted EBITDA of GBP24.1 million (2020: GBP14.2
million), an increase of 70%. This translated to an adjusted EBITDA
percentage in the year of 26.1% (2020: 27.9%). There were share
based payments in the year of GBP0.1 million (2020: GBPnil) and no
exceptional items in the year (2020: GBP1.5 million in relation to
the Company's Admission to AIM). The principal driver for the
material growth in adjusted EBITDA was the increased volume of
COVID-19 PCR testing which drove substantial levels of COVID-19
testing revenues and gross profits in the year.
Finance costs
Finance costs for the year were GBP0.4 million (2020: GBP7.9
million), a decrease of GBP7.5 million. The decrease was
principally caused by the conversion of PIK loan notes to equity
and the settlement of shareholder and bank loans, both in late
2020, which together accounted for GBP7.6 million of interest
charges in 2020. The finance costs of GBP0.4 million (2020: GBP0.3
million) related to finance leases charges. At the year-end date
the Group had no borrowings other than leases.
Tax
An income tax charge arose amounting to GBP4.0 million (2020:
credit of GBP0.2 million). The vast majority of the taxable profits
were generated in the UK, where the Group was liable to corporation
tax on a large company quarterly payment basis. Historic UK trading
tax losses were fully utilised in 2020 and the Group has trading
losses of GBP2.0 million (2020: GBP1.1 million) in its USA
subsidiary available for carry forward beyond the year-end
date.
Earnings per share
The basic and diluted earnings per share in the year amounted to
22.5 pence per share (2020: 5.3 pence per share), an increase of
325%. Adjusted earnings per share is an Alternative Performance
Measure and calculated by dividing the profit for the year
attributable to ordinary shareholders, excluding interest expense
attributable to the shareholder loans and PIK loan notes and
expenses related to exceptional items and share based payments, as
well as the tax effect of these items, by the weighted average
number of ordinary shares in issue during the year. The adjusted
earnings per share in the year amounted to 22.6 pence per share
(2020: 19.8 pence per share), an increase of 14%.
Intangible assets
Goodwill at the year-end date remained at GBP10.0 million, with
no impairment charged in the year and other intangible assets
decreased to a net book value of GBP0.2 million (2020: GBP0.3
million).
Property, plant and equipment and right-of-use assets
Net book value of property, plant and equipment at the year-end
date amounted to GBP8.2 million (2020: GBP7.0 million), an overall
increase of GBP1.2 million. Right-of-use assets at the year-end
date amounted to GBP10.3 million (2020: GBP9.5 million), an overall
increase of GBP0.8 million.
Additions in the year totalled GBP5.0 million, comprising
leasehold improvements of GBP0.7 million and laboratory equipment
of GBP4.3 million, which were primarily required to support the
creation and capacity build-up of COVID-19 PCR testing services. It
is expected that this equipment will be repurposed as COVID-19 PCR
testing levels decline.
Inventories
Inventories at the year-end date amounted to GBP5.0 million
(2020: GBP3.6 million), the increase largely due to increased
stockholding of COVID-19 testing consumables. This balance is after
including a stock provision totalling GBP2.1 million (2020:
GBPnil), which reflects the materially reduced level of COVID-19
PCR testing now expected in 2022 and the need to consider both the
shelf-life and expected usage of inventory levels on hand at the
year-end date.
Trade and other receivables
Trade and other receivables at the year-end date amounted to
GBP7.2 million (2020: GBP10.5 million), the decrease driven by the
phasing of receivables within the Infectious Disease Testing
business unit and a very strong focus on cash collection throughout
the year. The credit losses provision at the year-end date amounted
to GBP146,000 (2020: GBP34,000), the increase driven by the
increased revenues. Overall, debtor days outstanding at the
year-end date were 34 days (2020: 42 days) and during the year
averaged 43 days (2020: 37 days).
Lease liabilities
Total lease liabilities at the year-end date amounted to GBP13.0
million (2020: GBP12.1 million), an increase of GBP0.9 million, due
to additional laboratory equipment purchased in the year under
lease.
Cash and working capital
Cash generation from operations was strong at GBP33.2 million
(2020: GBP6.4 million). Cash and cash equivalents at the year-end
date amounted to GBP33.3 million (2020: GBP8.4 million). Borrowings
(excluding leases) have remained at zero through the year as the
Group redeemed and converted its outstanding PIK loan notes into
equity and repaid all of its bank and shareholder borrowings in
late 2020. The strong funding position of the Group was driven
principally by the increased profitability of the business fuelled
by the increase in COVID-19 PCR testing services, together with a
strong focus on cash conversion and working capital management.
Cash balances were also positively impacted by payments made for
COVID-19 PCR travel tests where revenues totalling GBP3.8 million
(2020: GBPnil) have been deferred. The Group had no bank borrowings
or debt facilities in place at the end of the year.
Net assets
Net assets at the year-end date amounted to GBP48.3 million
(2020: GBP31.8 million), the improved position arising from the
strong level of earnings generated during the year.
Contingent liability
As detailed further in note 14, the Group is in dispute with HM
Revenue & Customs ("HMRC") who have challenged the Group's VAT
treatment of COVID-19 PCR testing services provided. On
professional advice, the Group has treated the accounting for
COVID-19 PCR services as VAT exempt. HMRC has suggested that some
of those services should have been treated as standard rated for
VAT purposes. The Group has continued to take advice, which
supports the accounting treatment adopted, and remains in
communication with HMRC to address their comments raised. The Board
believes that HMRC's arguments are flawed and unlikely to succeed,
and there is also uncertainty over any potential liability, so no
provision has been made at the year-end date.
Share buyback programme
As announced on 8 March, the Company intends to seek shareholder
approval at the forthcoming AGM to implement a share buyback
programme. Further details will be announced in due course.
Tony Ratcliffe
Chief Financial Officer
Consolidated Statement of Profit and Loss and Other
Comprehensive Income
For the year ended 31 December 2021
Year ended
Year ended 31 December
31 December restated
2021 2020
Continuing operations: Note GBP'000 GBP'000
------------------------------------------------------ ---- ------------- ------------
Revenue 3,4 92,397 50,737
Cost of sales (56,184) (30,284)
------------------------------------------------------ ---- ------------- ------------
Gross profit 3 36,213 20,453
Distribution costs (3,651) (2,180)
Administrative expenses (11,573) (7,574)
Other operating Income 6 118 -
------------------------------------------------------ ---- ------------- ------------
Adjusted EBITDA 24,115 14,155
Depreciation (2,843) (1,890)
Amortisation (88) (102)
Share based payments (77) -
Exceptional costs 5 - (1,464)
------------------------------------------------------ ---- ------------- ------------
Operating profit 21,107 10,699
Finance income 7 21 -
Finance costs 7 (442) (7,908)
------------------------------------------------------ ---- ------------- ------------
Profit before tax 20,686 2,791
Taxation 8 (3,971) 201
------------------------------------------------------ ---- ------------- ------------
Profit attributable to equity shareholders
of the Company 16,715 2,992
------------------------------------------------------ ---- ------------- ------------
Other comprehensive income
Items that may be reclassified to profit
or loss:
- Exchange differences on translation of
foreign operations (37)
------------------------------------------- -------
Total comprehensive income for the year (8,182)
------------------------------------------- -------
Items that may be subsequently reclassified
to profit or loss:
- Exchange differences on translation of
foreign operations (318) 208
------------------------------------------------------ ---- ------------- ------------
Total comprehensive income attributable to
equity shareholders of the Company 16,397 3,200
------------------------------------------------------ ---- ------------- ------------
Earnings per share
Basic and diluted earnings per ordinary share 9 22.5p 5.3p
------------------------------------------------------ ---- ------------- ------------
Restatement of 2020
Following a reassessment of the classification of costs in 2021,
the 2020 comparatives for distribution costs (increase of
GBP607,000) and administrative expenses (decrease of GBP607,000)
have been restated to be comparable.
Consolidated Statement of Financial Position
As at 31 December 2021
31 December 31 December
2021 2020
Note GBP'000 GBP'000
------------------------------ ------------------------------------------------ ----------- -----------
Assets
Non-current assets
Intangible assets - goodwill 9,993 9,993
Intangible assets - other 192 349
Property, plant and equipment 8,226 6,959
Right-of-use assets 10,347 9,478
Deferred tax asset 79 395
Total non-current assets 28,837 27,174
------------------------------ ------------------------------------------------ ----------- -----------
Current assets
Inventories 11 4,999 3,598
Trade and other receivables 12 7,242 10,472
Corporation tax receivable 777 -
Cash and cash equivalents 33,304 8,435
------------------------------ ------------------------------------------------ ----------- -----------
46,322 22,505
Assets classified as held
for resale - 475
------------------------------ ------------------------------------------------ ----------- -----------
Total current assets 46,322 22,980
------------------------------ ------------------------------------------------ ----------- -----------
Total assets 75,159 50,154
------------------------------ ------------------------------------------------ ----------- -----------
Equity attributable to equity shareholders of the Company
Share capital 10 111 111
Share premium account 33,189 33,189
Foreign exchange reserve (147) 171
Share option reserve 77 -
Retained earnings 15,078 (1,637)
------------------------------ ------------------------------------------------ ----------- -----------
Total equity 48,308 31,834
------------------------------ ------------------------------------------------ ----------- -----------
Liabilities
Non-current liabilities
Trade and other payables 13 339 394
Lease liabilities 11,946 11,602
Provisions 137 141
------------------------------ ------------------------------------------------ ----------- -----------
Total non-current liabilities 12,422 12,137
------------------------------ ------------------------------------------------ ----------- -----------
Current liabilities
Trade and other payables 13 13,362 5,494
Corporation tax payable - 126
Lease liabilities 1,049 547
Provisions 18 16
-----------
Total current liabilities 14,429 6,183
------------------------------ ------------------------------------------------ ----------- -----------
Total liabilities 26,851 18,320
------------------------------ ------------------------------------------------ ----------- -----------
Total equity and liabilities 75,159 50,154
------------------------------ ------------------------------------------------ ----------- -----------
Consolidated Statement of Changes in Equity
For the year ended 31 December 2021
Share Foreign Share
Share premium exchange option Retained Total
capital account reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- --------- --------- ----------- ---------- ---------- ---------
Balance at 1 January 2020 2,906 - (37) - (80,117) (77,248)
-------------------------------- --------- --------- ----------- ---------- ---------- ---------
Profit for the year - - - - 2,992 2,992
Other comprehensive income - - 208 - - 208
-------------------------------- --------- --------- ----------- ---------- ---------- ---------
Total comprehensive income
for the year - - 208 - 2,992 3,200
-------------------------------- --------- --------- ----------- ---------- ---------- ---------
Transactions with owners recorded
directly in equity
- Redemption of PIK loan notes
in consideration for issuance
of shares 72,658 - - - - 72,658
- Reduction in share capital (75,488) - - - 75,488 -
- Proceeds from shares issued 3 - - - - 3
- Proceeds from shares issued
on Admission to AIM 32 34,968 - - - 35,000
- Costs of share issue - (1,779) - - - (1,779)
-------------------------------- --------- --------- ----------- ---------- ---------- ---------
Total transactions with owners (2,795) 33,189 - - 75,488 105,882
-------------------------------- --------- --------- ----------- ---------- ---------- ---------
Balance at 31 December 2020 111 33,189 171 - (1,637) 31,834
-------------------------------- --------- --------- ----------- ---------- ---------- ---------
Profit for the year - - - - 16,715 16,715
Other comprehensive income - - (318) - - (318)
-------------------------------- --------- --------- ----------- ---------- ---------- ---------
Total comprehensive income
for the year - - (318) - 16,715 16,397
-------------------------------- --------- --------- ----------- ---------- ---------- ---------
Transactions with owners recorded
directly in equity:
- Employee share schemes - - - 77 - 77
-------------------------------- --------- --------- ----------- ---------- ---------- ---------
Total transactions with owners - - - 77 - 77
-------------------------------- --------- --------- ----------- ---------- ---------- ---------
Balance at 31 December 2021 111 33,189 (147) 77 15,078 48,187
-------------------------------- --------- --------- ----------- ---------- ---------- ---------
Consolidated Statement of Cash Flows
For the year ended 31 December 2021
Year ended Year ended
31 December 31 December
2021 2020
GBP'000 GBP'000
------------------------------------------------- ------------ ------------
Cash flows from operating activities
Profit for the year 16,715 2,992
Adjustments for:
Depreciation of property, plant and equipment
and right-of-use assets 2,843 1,890
Amortisation 88 102
Profit on disposal of property, plant
and equipment (147) -
Finance costs 442 7,908
Finance income (21) -
Taxation 3,971 (201)
Other operating income (118) -
Issue costs of new shares - 1,464
Share based payment charges 77 -
Working capital adjustments:
(Increase) in inventories (1,401) (2,782)
(Decrease) in provisions (2) (18)
Decrease / (increase) in trade and
other receivables 3,228 (5,245)
Increase in trade and other payables 7,618 278
------------------------------------------------- ------------ ------------
Cash generated from operations 33,293 6,388
Income tax paid (4,509) (48)
------------------------------------------------- ------------ ------------
Net cash inflows from operating activities 28,784 6,340
------------------------------------------------- ------------ ------------
Cash flows from investing activities
Purchase of property, plant and equipment (2,975) (3,870)
Purchase of intangible assets (40) (140)
Proceeds on disposal of property,
plant and equipment 647 5,000
Net cash (used in) / generated by
investing activities activities (2,368) 990
------------------------------------------------- ------------ ------------
Cash flows from financing activities
Gross proceeds from issue of shares - 35,003
Costs of Admission to AIM and new
share issuance - (3,243)
New borrowings secured - 2,000
Repayment of borrowings - (30,253)
Interest paid (56) (2,750)
Payment of lease liabilities (1,445) (894)
------------------------------------------------- ------------ ------------
Net cash (used in) financing activities (1,501) (137)
------------------------------------------------- ------------ ------------
Net increase in cash and cash equivalents 24,915 7,193
Net foreign exchange difference on cash and cash (46) 7
Cash and cash equivalents at the beginning
of year 8,435 1,235
Cash and cash equivalents at the end
of year 33,304 8,435
------------------------------------------------- ------------ ------------
Notes to the Consolidated Financial Information
For the year ended 31 December 2021
1. General information
SourceBio International plc (the "Company" or "SourceBio") is a
company incorporated in England and Wales and domiciled in the UK.
The ordinary shares of the Company are traded on the AIM Market of
the London Stock Exchange. The address of the registered office is
1 Orchard Place, Nottingham Business Park, Nottingham, NG8 6PX.
SourceBio is the ultimate parent Company of a number of
subsidiaries whose principal activity is as an international
provider of integrated state-of-the-art laboratory services and
products to the healthcare and clinical, life and applied sciences
and biopharma industries.
2. Summary of significant accounting policies
Accounting policies for the year ended 31 December 2021
The principal accounting policies adopted in the preparation of
these consolidated financial statements are set out below. These
policies have been applied consistently to all the years presented,
unless otherwise stated.
Basis of preparation
In accordance with Section 435 of the Companies Act 2006, the
Group confirms that the financial information for the years ended
31 December 2021 and 2020 are derived from the Group's audited
financial statements and that these are not statutory accounts and,
as such, do not contain all information required to be disclosed in
the financial statements prepared in accordance with UK-adopted
International Accounting Standards. The statutory accounts for the
year ended 31 December 2020 have been delivered to the Registrar of
Companies. The statutory accounts for the year ended 31 December
2021 have been audited and approved but have not yet been
filed.
The financial statements for the year ended 31 December 2021
(including the comparatives for the year ended 31 December 2020)
were approved by the Board of Directors on 4 April 2022. The
Group's audited financial statements for the year ended 31 December
2021 received an unqualified audit opinion and the auditor's report
contained no statement under section 498(2) or 498(3) of the
Companies Act 2006.
The Group financial statements, which consolidate those of
SourceBio International PLC and all of its subsidiaries, have been
prepared under the historical cost convention and under the basis
of going concern.
SourceBio has prepared its Report and accounts for the year
ended 31 December 2021, in accordance with UK-adopted International
Accounting Standards ("IFRS"). The principal accounting policies
adopted are consistent with those disclosed in the financial
statements for the year ended 31 December 2020, and are detailed
below.
New standards, amendments and interpretations issued
For the purposes of the preparation of these consolidated
financial statements, the Group has applied all standards and
interpretations that are effective for accounting periods beginning
on or after 1 January 2021. There was no significant impact of new
standards and interpretations adopted in the year.
Any new or amended accounting standards or interpretations that
are not yet mandatory have not been early adopted. None of the new
standards or interpretations issued but not yet adopted are
expected to have a material impact on the Group.
Going concern
The Directors have prepared detailed budgets and forecasts
covering the period to 31 December 2023. These plans take into
account all reasonably foreseeable circumstances and include
consideration of trading results and cash flows on a month-by-month
basis. This forecasting has considered the potential impact derived
from the Infectious Disease Testing business unit, which is
expected to continue to contribute, more modestly than in 2021, to
the financial results going forward.
The Group is expected to generate cash and operating profits
sufficient to meet its day-to-day operating needs and to support
its planned capital expenditure. Taking into account the current
level of cash balances and based on their enquiries and the
information available to them in respect of the other risks and
uncertainties set out herein, the Directors have a reasonable
expectation that the Group has adequate resources to continue
operating for the foreseeable future. Thus, they have adopted the
going concern basis of accounting in preparing these financial
statements.
Basis of consolidation
The Group's consolidated financial statements include the
results of the Company and all its subsidiaries. Subsidiaries are
all entities over which the Group has control. The Group controls
an entity where the Group is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to
affect those returns through its power to direct the activities of
the entity. Subsidiaries are fully consolidated from the date on
which control is transferred to the Group. They are deconsolidated
from the date that control ceases.
Inter-company transactions, balances and unrealised gains on
transactions between Group companies are eliminated. Unrealised
losses are also eliminated unless the transaction provides evidence
of an impairment of the transferred asset. Accounting policies of
subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
Intangible assets
Goodwill
Goodwill is initially measured at fair value, being the excess
of the aggregate of the consideration transferred over the fair
value of the net assets acquired, and any previous interest held
over the net identifiable assets acquired and liabilities assumed.
After initial recognition, goodwill is measured at cost less any
accumulated impairment losses. The goodwill is tested annually for
impairment irrespective of whether there is an indication of
impairment.
For the purposes of impairment testing, goodwill is allocated to
the cash generating units ("CGUs") expected to benefit from the
acquisition. CGUs to which goodwill has been allocated are tested
for impairment at least annually, or more frequently when there is
an indication that the unit may be impaired. If the recoverable
amount of the CGU is less than the carrying amount of the unit, the
impairment loss is allocated first to reduce the carrying amount of
any goodwill allocated to the unit and then to the other assets of
the unit pro-rata on the basis of the carrying amount of each asset
in the unit.
Intangible assets (other than goodwill)
Intangible assets acquired separately from a business are
recognised at cost and are subsequently measured at cost less
accumulated amortisation and accumulated impairment losses.
Intangible assets acquired on business combinations are recognised
separately from goodwill at the acquisition date if the fair value
can be measured reliably.
Amortisation is recognised so as to write off the cost or
valuation of assets less their residual values over their useful
lives on the following bases:
-- Software: 5 years
-- Development costs: 4 years
-- Customer relationships: 4 to 6 years
Research and development expenditure
Research expenditure is written off against profits in the year
in which it is incurred. Identifiable development expenditure is
capitalised to the extent that the technical, commercial and
financial feasibility can be demonstrated. Development costs relate
to a laboratory information management system that was developed
internally by the Group.
Property, plant and equipment
Property, plant and equipment is stated at cost, net of
accumulated depreciation and accumulated impairment losses. Cost
comprises purchase cost together with any incidental cost of
acquisition.
Depreciation is provided to write down the cost less estimated
residual value of all tangible fixed assets by equal instalments
over their expected useful economic lives on a straight-line basis.
The following useful lives are applied:
-- Freehold buildings: 50 years
-- Leasehold improvements: remaining lease term
-- Plant, fixtures, fittings and equipment: 3 to 15 years
-- Motor vehicles: 4 years
Right-of-use assets (included within property, plant and
equipment) relate to leasehold buildings and office equipment and
are depreciated over the lease term.
Impairment of non-current assets
At each reporting period-end date, the Group and Company reviews
the carrying amounts of its non-current assets to determine whether
there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent
of the impairment loss (if any). Where it is not possible to
estimate the recoverable amount of an individual asset, the Group
estimates the recoverable amount of the CGU to which the asset
belongs.
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset or CGU is estimated to be
less than its carrying amount, the carrying amount of the asset or
CGU is reduced to its recoverable amount. An impairment loss is
recognised immediately in the Statement of Comprehensive
Income.
Recognised impairment losses are reversed if, and only if, the
reasons for the impairment loss have ceased to apply. Where an
impairment loss subsequently reverses, the carrying amount of the
asset or CGU is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does
not exceed the carrying amount that would have been determined had
no impairment loss been recognised for the asset or CGU in prior
years. A reversal of an impairment loss is recognised immediately
in profit or loss.
Inventories
Inventory is stated at the lower of cost and net realisable
value. Cost is based on the cost of purchase on a first-in,
first-out basis and includes costs associated with bringing the
items to their present location and condition. Net realisable value
is the estimated selling price less costs to complete and sell.
Financial instruments
The Group classifies financial instruments, or their component
parts, on initial recognition as a financial asset, a financial
liability or an equity instrument in accordance with the substance
of the contractual arrangement. Financial instruments are
recognised on the date the Group becomes a party to the contractual
provisions of the instrument. Financial instruments are recognised
initially at fair value plus, in the case of a financial instrument
not at fair value through profit and loss, transaction costs that
are directly attributable to the acquisition or issue of the
financial instrument. Financial instruments are derecognised on the
trade date when the Group is no longer a party to the contractual
provisions of the instrument.
Non-derivative financial instruments comprise trade and other
receivables, cash and cash equivalents, loans and borrowings, lease
liabilities and trade and other payables.
Trade and other receivables and trade and other payables
Trade and other receivables are initially recognised at fair
value and subsequently at amortised cost using the effective
interest method less any allowance for expected credit losses.
Trade receivables are generally due for settlement within 30 days.
The Group has applied the simplified approach to measuring expected
credit losses, which uses a lifetime expected loss allowance. To
measure the expected credit losses, trade receivables have been
grouped based on days overdue.
Trade and other payables are recognised initially at transaction
price plus attributable transaction costs. Subsequent to initial
recognition, they are measured at amortised cost using the
effective interest method, less any expected credit losses in the
case of trade receivables. If the arrangement constitutes a
financing transaction, for example if payment is deferred beyond
normal business terms, then it is measured at the present value of
future payments discounted at a market rate of interest for a
similar debt instrument.
Contract assets
Contract assets are recognised when revenue is recognised but
payment is conditional on a basis other than the passage of time.
Contract assets are included in trade and other receivables.
Contract liabilities
Contract liabilities are recognised when payment from a customer
is received in advance of performance obligations being satisfied.
Contract liabilities are recognised in trade and other
payables.
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at the
present value of future payments discounted at a market rate of
interest. Subsequent to initial recognition, interest-bearing
borrowings are stated at amortised costs using the effective
interest method, less any impairment losses.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call
deposits. Bank overdrafts that are repayable on demand and form an
integral part of the Group's cash management are included as a
component of cash and cash equivalents, for the purpose only on the
cash flow statement.
Provisions
A provision is recognised in the Statement of Financial Position
when the Group has a present legal or constructive obligation as a
result of a past event, that can be reliably measured, and it is
probable that an outflow of economic benefits will be required to
settle the obligation. Provisions are determined by discounting the
expected future cash flows at a pre-tax rate that reflects risks
specific to the liability. Where the effect of the time value of
money is material, the amount expected to be required to settle the
obligation is recognised at present value. When a provision is
measured at present value, the unwinding of the discount is
recognised as a finance cost in profit or loss in the period in
which it arises.
Employee benefits
T he Group operates a defined contribution money purchase
pension scheme under which it pays contributions based upon a
percentage of the members' basic salary. Contributions to defined
contribution pension schemes are charged to the Statement of
Comprehensive Income and differences between contributions payable
in the year and contributions actually paid are shown as either
accruals or prepayments.
Finance income and expenses
Finance expenses comprise interest payable (including lease
liability interest) and is recognised in the profit or loss using
the effective interest method.
Finance income is recognised in the profit or loss as it
accrues.
Leases
The Group leases various office and laboratory facilities,
warehousing, as well as certain laboratory, IT and office equipment
and a number of vehicles. Rental contracts are typically made for
fixed periods of variable lengths. Assets and liabilities arising
from a lease are initially measured on a present value basis. Lease
liabilities include the net present value of the following lease
payments:
-- fixed payments, less any lease incentives receivable;
-- variable lease payments based on an index or a rate,
initially measured using the index or rate as at the commencement
date;
-- amounts expected to be payable by the Group under residual
value guarantees;
-- the exercise price of a purchase option if the Group is
reasonably certain to exercise that option; and
-- payments of penalties for terminating the lease, if the lease
term reflects the Group exercising that option.
Lease payments to be made under reasonably certain extension
options are also included in the measurement of the liability. The
lease payments are discounted using the interest rate implicit in
the lease. If that rate cannot be readily determined, which is
generally the case for leases held by the Group, the Group uses an
estimated incremental borrowing rate, being the rate that the
individual lessee is estimated to have to pay to borrow the funds
necessary to obtain an asset of similar value to the right-of-use
asset in a similar economic environment with similar terms,
security and conditions.
The Group is exposed to potential future increases in variable
lease payments based on an index or rate, which are not included in
the lease liability until they take effect. When adjustments to
lease payments based on an index or rate take effect, the lease
liability is reassessed and adjusted against the right-of-use
asset.
Lease payments are allocated between principal and finance cost.
The finance cost is charged to profit or loss over the lease period
so as to produce a constant periodic rate of interest on the
remaining balance of the liability for each period.
Right-of-use assets are measured at cost comprising the
following:
-- the amount of the initial measurement of lease liability;
-- any lease payments made at or before the commencement date
less any lease incentives received;
-- any initial direct costs; and
-- any potential restoration costs.
In addition, the carrying amount of lease liabilities and
right-of-use asset is remeasured if there is a modification, a
change in the lease term or a change in the fixed lease payments.
The remeasured lease liability (and corresponding right-of-use
asset) is calculated using a revised discount rate, based upon a
revised incremental borrowing rate at the time of the change.
The Group leases properties in Nottingham and Cambridge in the
UK, San Diego in the USA, as well as Tramore and Dublin in Ireland.
All such leases are accounted for by recognising a right-of-use
asset and a lease liability.
Right-of-use assets are generally depreciated over the shorter
of the asset's useful life and the lease term on a straight-line
basis. If the Group is reasonably certain to exercise a purchase
option, the right-of-use asset is depreciated over the underlying
asset's useful life.
Payments associated with short-term leases of equipment and
vehicles and all leases of low-value assets are recognised on a
straight-line basis as an expense in profit or loss. Short-term
leases are leases with a lease term of 12 months or less without a
purchase option. Low-value assets comprise IT equipment and small
items of office equipment.
Revenue recognition
Revenue is recognised when control of a service or product
provided by the Group is transferred to the customer, in line with
the Group's performance obligations in the contract, and at an
amount reflecting the consideration the Group expects to receive in
exchange for the provision of services.
The Group recognised revenue from the following activities:
Laboratory testing services
Revenues received or receivable for services, typically provided
under contract pathology, COVID-19 PCR testing and Sanger
Sequencing services are recognised when the services are provided ,
which is when a test result is delivered.
Products
Revenue from sales of products, typically provided under
processed human tissue, genomic reagents and antibodies and
serology is recognised when goods are delivered to and accepted by
the customer.
Service agreements
Revenue relating to service contracts invoiced at the inception
of the agreements is deferred such that the income is recognised
over the contract life.
Contracts recognised over time and with multiple elements
The Group enters into certain contracts that are performed over
time. These include Genomics, Validation Services and
Manufacturing.
Under these contracts, revenue is recognised based on the stage
of completion. The assets created do not have an alternative use
and the Group has an enforceable right to payment for performance
completed to date on such contracts.
Where the Group enters into contracts for the supply and
installation of products, revenue is recognised based on the
specific terms of each contract. In some instances, this requires
the allocation of the transaction price between the supply of the
product and the installation and commissioning. Where contracts
require separation, the revenue is allocated based on the fair
values attributable to the separate elements and the performance
obligations being met.
Testing kits
The price charged for the testing kits is specified in
agreements negotiated with each customer. The price for the testing
kits comprises an amount for laboratory consumables and reagents
required to perform the tests and, where the systems are supplied
on a rental basis, an equipment premium, which is equivalent to a
rental charge, and an amount for maintenance of the systems during
the term of the agreement. All contracts are for a fixed price and
do not include variable consideration.
Revenue associated with the laboratory consumables and reagents
is recognised when the testing kits are delivered and accepted by
the customer. Revenue from the equipment premium and maintenance
element is recognised over the period in which the customer is
expected to benefit from the provision of these elements of the
supply.
Where there is a delay in returning a testing kit to the
laboratory for the testing service to be performed, the revenue is
deferred until the likelihood of it not being returned is highly
probable or if the testing kit reaches the end of its period of
shelf-life.
Pre-paid vouchers
Vouchers are sold to customers in advance in return for the
right to receive certain sequencing services in the future. These
are not cash refundable. The revenue associated with these voucher
sales is recognised when the services are performed and obligations
met with an estimate made for a proportion of vouchers that are not
expected to be redeemed, based on prior period redemption
rates.
Taxes
Corporation tax, where payable, is provided on taxable profits
at the current rate.
Deferred tax is provided on all temporary differences at the
balance sheet date between the tax bases of assets and liabilities
and their carrying amounts for financial reporting purposes.
Deferred tax assets are recognised for all deductible temporary
differences, carry-forward of unused tax assets and unused tax
losses, to the extent that it is probable that taxable profit will
be available against which the deductible temporary differences,
and the carry-forward of unused tax assets and unused tax losses
can be utilised. The carrying amount of deferred tax assets is
reviewed at each balance sheet date and reduced to the extent that
it is no longer probable that sufficient taxable profit will be
available to allow all or part of the deferred tax asset to be
utilised.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to offset current tax assets against
current tax liabilities, and when the deferred tax assets and
liabilities relate to taxes levied by the same taxation authority
on either the taxable entity or different taxable entities where
there is an intention to settle the balances on a net basis.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply to the year when the asset is
realised or the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantively enacted at the
balance sheet date.
Foreign currency translation
Transactions in currencies other than the functional currency
(foreign currency) are initially recorded at the exchange rate
prevailing on the date of the transaction.
Monetary assets and liabilities denominated in foreign
currencies are translated at the rate of exchange ruling at the
reporting date. Non-monetary assets and liabilities denominated in
foreign currencies are translated at the rate ruling at the date of
the transaction, or, if the asset or liability is measured at fair
value, the rate when that fair value was determined.
All translation differences are taken to profit or loss, except
to the extent that they relate to gains or losses on non-monetary
items recognised in other comprehensive income, when the related
translation gain or loss is also recognised in other comprehensive
income.
The functional currency of the Group is Sterling. Exchange
differences arising from the translation of foreign operations are
recognised in other comprehensive income and accumulated in a
foreign currency translation reserve within equity.
Exceptional costs
The Group presents as exceptional items on the face of the
Statement of Comprehensive Income those material items of income
and expense which, because of the nature, expected infrequency and
materiality of the events giving rise to them, merit separate
presentation to allow shareholders to better understand the
elements of financial performance in the year, so as to facilitate
comparison with prior years.
Equity instruments
Equity instruments issued by the Group are recorded as the value
of the proceeds received net of direct issue costs.
Share based payments
The cost of equity settled transactions with employees is
measured by reference to the fair value on the date they are
granted. Where there are no market conditions attaching to the
exercise of the options, the fair value is determined using a range
of inputs into a Black-Scholes pricing model. Where there are
market conditions attaching to the exercise of the options a Monte
Carlo model is used to determine fair value based on a range of
inputs. The value of equity-settled transactions is charged to the
Statement of Comprehensive Income over the period in which the
service conditions are fulfilled with a corresponding credit to the
share option reserve in equity.
On the exercise of share options, an amount equal to the fair
value of the option at the date it was granted is transferred from
the share option reserve into retained earnings.
3. Operating segments
Revenue and gross profit by business segment
Revenues and gross profits are presented for each business
segment but, due to the shared nature of many expenses, expenses
are not separately allocated across the business segments. T here
have been immaterial sales between business segments, and where
these do occur, they are at arm's length pricing.
2021 2020
Revenue Gross profit Revenue Gross profit
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- --------- ------------- ---------------- ----------------
Healthcare Diagnostics 6,411 2,134 4,424 1,046
Genomics 4,960 1,918 4,219 1,734
Stability Storage 7,037 3,560 6,880 3,857
----------------------------- --------- ------------- ---------------- ----------------
Core business units 18,408 7,612 15,523 6,637
Infectious Disease Testing 73,567 28,509 34,463 13,663
Non-core operations,
wound down 422 92 751 153
----------------------------- --------- ------------- ---------------- ----------------
Total 92,397 36,213 50,737 20,453
Due to the shared nature of many assets, assets and liabilities,
for both 2020 and 2021, are not able to be separately allocated
across the business segments but are reported to the Chief
Operating Decision Maker ("CODM") on an aggregate basis.
Adjusted EBITDA (Alternative Performance Measure)
The CODM, Board and Executive Management team primarily use a
measure of adjusted earnings before interest, tax, depreciation and
amortisation, share based payments and exceptional items (EBITDA
before share based payments and exceptional costs, or adjusted
EBITDA) to assess the performance of the overall business. This is
an Alternative Performance Measure. The reconciliation of adjusted
EBITDA to operating profit is shown on the face of the Consolidated
Statement of Profit and Loss.
Exceptional items are summarised in note 5.
4. Revenue
Geographical segments
The Group manages its business segments on a global basis. The
operations are based primarily in the UK, with additional
facilities in Europe and the USA.
The revenue analysis in the table below is based on the location
of the customer.
2021 2020
GBP'000 GBP'000
--------------- -------- --------
United Kingdom 88,727 46,657
Europe 2,285 2,349
USA 1,337 1,731
Rest of world 48 -
Total 92,397 50,737
--------------- -------- --------
The Group details below significant customers who have
contributed to more than 10% of Group revenue:
2021 2020
GBP'000 GBP'000
----------- -------- --------
Customer A 14,453 10,700
Customer B 12,750 -
Customer C 12,151 -
Customer D 1,200 17,200
----------- -------- --------
Group revenue has been recognised according to time as
below:
2021 2020
GBP'000 GBP'000
------------------------------ -------- --------
Recognised at a point in time 86,338 44,984
Recognised over time 6,059 5,753
Total 92,397 50,737
------------------------------ -------- --------
5. Exceptional items
2021 2020
GBP'000 GBP'000
----------------------------------------------------- --------- --------
Costs in relation to the Company's Admission to AIM - 1,464
----------------------------------------------------- --------- --------
The Company was admitted to AIM in 2020 and incurred total
professional fees and transaction costs (including unrecoverable
VAT) of GBP3,243,000, of which GBP1,779,000 was charged to the
share premium account and GBP1,464,000 was recorded as exceptional
costs in the profit and loss
6. Other operating income
2021 2020
Group GBP'000 GBP'000
----------------------------------- -------- --------
Research & development expenditure
credit 118 -
----------------------------------- -------- --------
7. Finance costs and finance income
Finance costs
2021 2020
GBP'000 GBP'000
------------------------ -------- --------
On bank and other loans - (7,677)
On lease liabilities (442) (231)
Total (442) (7,908)
------------------------ -------- --------
Finance income
2021 2020
GBP'000 GBP'000
----------------------------------- -------- --------
Bank and other interest receivable 21 -
Total 21 -
----------------------------------- -------- --------
8. Taxation
2021 2020
Current tax GBP'000 GBP'000
----------------------------------------- -------- --------
UK corporation tax on profits for the
current year 3,548 232
Adjustment in respect of previous years 7 (62)
Foreign taxation 100 54
Total 3,655 224
----------------------------------------- -------- --------
Deferred tax
Origination and reversal of timing differences 382 (431)
Adjustment in respect of previous years 52 -
Effect of tax rate change on opening
balance (118) 6
Total 316 (425)
------------------------------------------------ ------ ------
Total charge / (credit) 3,971 (201)
-------------------------- ------ ------
Reconciliation of tax expense
The tax assessed on the profit on ordinary activities for the
year is higher (2020: lower) than the standard rate of corporation
tax in the UK of 19% (2020: 19%)
2021 2020
GBP'000 GBP'000
--------------------------------------------------- -------- --------
Profit on ordinary activities before taxation 20,686 2,791
Profit on ordinary activities by rate of
tax 3,930 530
Expenses not deductible for tax purposes 126 422
Ineligible depreciation 18 23
Leases including sale and leaseback (215) (559)
Movement in deferred tax not recognised 106 (1,402)
Adjustment in respect of prior periods 59 (62)
Interest not deductible under thin capitalisation
rules - 898
Effect of change in corporation tax rate (118) 6
Effect of CT rate being lower than DT rate 92 -
Other (27) (57)
--------------------------------------------------- -------- --------
Tax charge / (credit) on profit or loss 3,971 (201)
--------------------------------------------------- -------- --------
As a consequence of quarterly estimates made during the year,
the Group overpaid UK corporation tax of GBP771,000 which is
recoverable.
The Group had GBP380,000 (2020: GBP274,000) of deferred tax
assets arising from tax losses within Source BioScience Inc. and
other short-term timing differences which, based on the anticipated
future profitability of the entity, have not been recognised.
9. Earnings per share
Basic earnings per share is calculated by dividing the result
for the year attributable to ordinary shareholders of the Company
by the weighted average number of shares in issue during the year.
For 2020, the share numbers used were calculated consistently to
take into account the 2020 share reorganisation in contemplation of
Admission in October 2020, i.e. by assuming the various steps of
the share reorganisation had been in effect through 2020.
Diluted earnings per share is calculated by dividing the result
for the year attributable to ordinary shareholders by the weighted
average number of ordinary shares in issue during the year adjusted
for the effects of dilutive options. For 2020, there were no
options in issue, so diluted earnings per share were the same as
basic earnings per share.
Adjusted earnings per share, an Alternative Performance Measure,
is calculated by dividing the result for the year attributable to
ordinary shareholders, which adds or deducts items that are
typically adjusted for by users of financial statements. These
items comprise interest expense attributable to the shareholder
loans and PIK loan notes (which applied only in 2020), expenses
related to exceptional items, share based payments as well as the
tax effect of these items, by the weighted average number of
ordinary shares in issue during the year.
The calculation of adjusted earnings, which includes any impact
of taxation is as below:
2021 2020
GBP'000 GBP'000
------------------------------------------- -------- --------
Profit for the year 16,715 2,992
Interest payable on shareholder loans and
PIK loan notes - 7,677
Exceptional items - 1,464
Share based payments 77 -
Tax effect of the above - (964)
------------------------------------------- -------- --------
Adjusted profit for the year 16,792 11,169
------------------------------------------- -------- --------
The reconciliation of the earnings and weighted average number
of shares used in the calculations is set out below:
2021 2020
--------------------------- ---------------------------
Weighted Weighted
average average
number Per number Per
of share of share
Earnings shares amount Earnings shares amount
GBP'000 000's (pence) GBP'000 000's (pence)
------------------------------------------------------------------------ -------- -------- ------- -------- -------- -------
Basic EPS
Earnings attributable
to ordinary shareholders
of the Company 16,715 74,183 22.5p 2,992 56,307 5.3p
------------------------------------------------------------------------ -------- -------- ------- -------- -------- -------
Effect of diluted share
options - 37 - -
Earnings attributable
to ordinary shareholders
of the Company 16,454 74,183 22.2p 2,992 56,307 5.3p
-------------------------- ------ ------ ----- ----- ------ ----
Diluted EPS
Earnings attributable
to ordinary shareholders
of the Company 16,715 74,220 22.5p 2,992 56,307 5.3p
------------------------------------------------------------------------ -------- -------- ------- -------- -------- -------
Adjusted basic EPS
Adjusted earnings attributable
to
ordinary shareholders
of the Company 16,792 74,183 22.6p 11,169 56,307 19.8p
------------------------------------------------------------------------ -------- -------- ------- -------- -------- -------
10. Share capital
2021 2020
Issued and fully paid ordinary
shares of 0.15p each Number GBP'000 Number GBP'000
------------------------------- ----------- ------- ---------- -------
At 31 December 74,183,038 111 74,183,038 111
------------------------------- ----------- ------- ---------- -------
There were no share movements in 2021.
11. Inventories
2021 2020
Group GBP'000 GBP'000
------------------------------------ -------- --------
Raw materials 4,616 3,598
Finished goods and goods for resale 383 -
------------------------------------ -------- --------
Total 4,999 3,598
------------------------------------ -------- --------
Inventories recognised as an expense during the year ended 31
December 2021 amounted to GBP37,638,000 (2020: GBP20,991,000).
These were included in cost of sales. There is no material
difference between the replacement cost of inventories and the
amounts stated above.
Inventory provisions of GBP2,096,000 for the year (2020:
GBP18,000) were deducted from gross inventories in the amounts
above. These provisions were principally made against COVID-19 PCR
related testing materials, in the light of uncertainties of
anticipated demand following recent changes in Government travel
guidelines. The provision of GBP18,000 made in 2020 was reversed
during 2021.
12. Trade and other receivables
2021 2020
GBP'000 GBP'000
------------------------------- -------- --------
Amounts falling due within
one year:
Trade receivables 5,989 8,686
Less: provision for impairment
of receivables (146) (34)
------------------------------- -------- --------
Net trade receivables 5,843 8,652
Other receivables 185 148
Contract assets 413 1,115
Prepayments and accrued income 801 557
------------------------------- -------- --------
Total 7,242 10,472
------------------------------- -------- --------
13. Trade and other payables
2021 2020
Current GBP'000 GBP'000
------------------------------ -------- --------
Trade payables 4,740 2,400
Other payables - 69
Other tax and social security 483 614
Accruals 2,933 797
Contract liabilities 5,206 1,614
------------------------------ -------- --------
Total 13,362 5,494
------------------------------ -------- --------
Non-current
------------------------------ -------- --------
Contract liabilities 339 394
------------------------------ -------- --------
14. Contingent liability
In December 2021, HMRC issued a letter to the Group that
challenged the Group's VAT treatment of COVID-19 PCR testing
services provided. On professional advice, the Group has treated
the accounting for COVID-19 PCR services as VAT exempt. HMRC has
suggested that some or all of those services provided since 17
December 2020 should have been treated as standard rated for VAT
purposes. The Group has continued to take advice, which supports
the accounting treatment adopted, and remains in communication with
HMRC to address their comments raised. Should all arguments
presented by HMRC be held and based on draft calculations, the
maximum potential cash liability payable by the Group would be
GBP5.0 million in the event that none of the potential maximum VAT
liability was recovered from customers. The maximum potential net
cash benefit due to the Group would be GBP8.6 million in the event
that all of the potential maximum VAT liability was recovered from
customers. The Group believes that HMRC's claims are invalid and
the Group will defend its position as necessary. The Board has
concluded that it is probable that the Group will succeed in its
defence of HMRC's claims and, in the light of this conclusion,
coupled with the inherent uncertainty of any potential liability,
no provision has been made in these financial statements.
15. Post Balance Sheet Event
On 8 March 2022, the Company purchased the entire issued capital
of LDPath Limited ("LDPath"), a London based leader in Digital
Pathology testing services.
Unaudited management accounts for the year to 31 January 2022
showed revenue of GBP4.6 million (a growth of 97% over the prior
year revenues) and earnings before interest, taxes, depreciation
and amortisation (EBITDA) of GBP0.4 million and profit before tax
of GBP0.3 million.
The up-front consideration was GBP18.5 million, reduced by a
retention of GBP1.9 million which will be held for a period of two
years to cover any claims under customary representations and
warranties. There was a further retention relating to the
collection of certain receivables of GBP0.4 million. Following the
reduction of these retentions, GBP16.2 million was paid in cash
upon completion on 8 March 2022. This cash was available from the
Group's existing cash resources.
The Company agreed to adopt the balance sheet on the completion
date, which is estimated to show net working capital of GBP0.3
million and total net assets of GBP0.6 million, and to include net
debt of GBP0.9 million.
Subject to exceeding individual revenue thresholds for the
remainder of 2022 as well as for calendar years 2023 and 2024,
additional consideration will be payable to the vendors of LDPath.
The aggregate earn-out payments are capped to a technical ceiling
of GBP15.0 million. Any earn-out payments will be paid in cash
following completion of the audit of that relevant year.
The Group has not yet finalised its proposed purchase price
allocation in respect of the acquisition, but expects to have a
draft purchase price allocation available for inclusion in the
interim results for the six months ended 30 June 2022.
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END
FR USONRUKUSRAR
(END) Dow Jones Newswires
April 05, 2022 02:00 ET (06:00 GMT)
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